DoT demands excise breaks for telecom SEZs

Even as Left parties have demanded a review of the tax concessions provided to special economic zones (SEZs), the department of telecommunications (DoT) has sought extension of excise duty exemptions to industrial units set up in telecom-specific SEZs.

Four telecom-specific zones "" of Nokia, Flextronics, State Industries Promotion Corporation of Tamil Nadu (SIPCOT) and Velankani Group "" have been approved. The Nokia and Flextronics facilities are already operational. Between them, they have investments of $1.3 billion promised by 2007-end. All the four zones are at Sriperumbudur near Chennai in Tamil Nadu.

Communications Minister Dayanidhi Maran hails from the state and has actively pursued the setting up of telecom manufacturing units by foreign companies in India.

DoT's demand, which raises the spectre of more demands for excise breaks in other zones, is based on the premise that a 2006 central notification that allows customs breaks for SEZ units does not take into account a 2005 customs department notification that exempts additional duty on goods produced and exported by SEZ units .

"Industries in SEZs are entitled to the exemption from additional excise duty with respect to their domestic tariff area clearances," the DoT said in a presentation at a meeting of the Empowered Group of Ministers on SEZs last month.

The meeting was held to consider the views of different political parties on SEZs, especially on the tricky issue of land acquisition.

Of the total $1.3 billion, $200 million worth of investment has gone into the Nokia zone. The Flextronics zone has seen investments of $100 million, while the SIPCOT zone is expected to garner investments of about $500 million from companies like Motorola, Foxconn and Dell.

The 100 hectare SEZ to be developed by the Velankani Group at Sriperumbudur has got in-principle nod from the Board of Approvals and is likely to house 20 to 25 units with an investment of $500 million.

Though this SEZ was expected to be operational by end 2007, its fate will depend on the next EGoM meeting to be held shortly. All SEZ proposals and notifications of approved ones have been put on hold for the time being.